Economics, morality, hypothetical models and coffee table discussions

Wow! This happens to be my first post on the wordpress blog.

I would never want my posts to be controversial. Choosing to ruminate and write on economics , politics in current climate is controversial enough.

But I guess, we all have a predilection for certain topics for coffee table gossips.

I have always gravitated towards discussions on economic policies, politics and morality of it all.  While the field of pure scientific activities are almost exclusively decided by the experts. We all participate in economic activities and collectively shape it’s course. Our thoughts and opinion, how ever minuscule, irrelevant or incorrect plays it’s role in shaping the collective thought. It becomes then pertinent that we all give some thought to what we support and shape – economic and political policies.

For long, I have supported the thought that realm of economic activities should be left to it’s own device, the market and government should instead focus on the critical aspect of governance, protection of individual rights and speedier justice.

Recently me and a friend had a discussion on this topic. He proposes government as a watchdog over the greedy individual, who can make a run over others in a capitalist society without any checks and balances. He proposed a hypothetical construct to advance his viewpoint.

Here is a short summary of this construct

Consider a scenario of an island consisting of just ten people and the government. Consider a situation, where one person happens to be the smartest of all among them and slowly he is able to acquire all the land available by buying others out. He simply has complete control and is capable to bring misery on others. Such a situation wouldn’t be ethical. Only a government as watchdog can eliminate such disparity to occur. Capitalism on the other hand, when left to it’s own device can become ruinous to the society as human greed is limitless.

We had a short discussion with different view point on this and I couldn’t really put my view point across due to paucity of time. In this post, I present my views and hopefully we can pickup the discussion where we left.

Hypothetical constructs are very useful to delineate the essential from the real life economic activities which can be mind bogglingly complex.

How ever, I wonder some times, how hypothetical they can be?

I reject some of the basic tenets of this hypothetical construct.

First, I do not consider that this hypothetical scenario can ever be realized.  Even as the smart elk goes on his quest to acquire all property that is available. The property value would rise with each acquisition. I can not come to terms and conditions under which the last man with the property would sell his land to this smart elk. The land would invariably become more valued than any thing else he may be able to acquire in exchange.

The second aspect that this raises is the “locus standi” of this situation in realm of ethics. When Bernard Mandeville wrote ” The fable of Bees”, he for ever mixed the moral and economic discussions together. We can never come out of it. A lot of economic thoughts, policies advanced as result of this conflict, have had serious lacunae despite their desire for a equitable society.

To me a human with a greed to advance himself is not a megalomaniac. He is not the selfless sacrificial creature. The very realm of economic activity rests on the fact that every human would advance his self interest through proper, ethical and rational means.

The third tenet that this hypothetical construct assumes is the benign nature of government. It is not a distinctive creature from “Homo Economicus”. It consists of the very same people whom we are quite eager to term as greedy.  On what basis do we assume that an arbitration of such a watchdog would be towards the ideal that we desire, if it is in conflict with human nature.

Well, my rant does not happen to be a criticism of government but I do believe that they have a proper role to play but not as one that directs the economy.

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